First Apartment Deal Success Story

[Mike Mefferd]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $550,000
Cash invested: $150,000
Sale price: $750,000

This deal was purchased with almost no money down. We used a personal loan from Sofi for $50,000, a 12 month interest free credit card balance transfer for $20,000 and the remaining money from a 401k loan. We also structured the contract to have the seller credit us at closing the full collected rents, an extra year of taxes, and had the seller pay $7,500 in closing cost assistance.

Looking back, I'm won't lever up that much in the future, but there were so many great lessons I learned on this deal. The most important lesson I learned was to just get started. You learn so much as you go. I made so many mistakes along the way, yet still turned this into a great return!

What made you interested in investing in this type of deal?

I was having a hard time finding single family homes that would generate at least a 12% Cash on Cash return. With apartments, I was able to generate a 15% Cash on Cash return, not including the principal paydown and property appreciation.

I also learned you have so much more control of the value with apartments. As you learn the industry, you get better and better at reducing expenses, driving the revenue, and maximizing the value.

How did you find this deal and how did you negotiate it?

The deal was listed on the MLS. I just put in an offer and it was accepted. This was a deal I was fortunate enough to find where the seller just wanted out.

Don't ever assume you think you know what a seller wants. Submit your offer because you never know what someone will take for their property.

How did you finance this deal?

Combination of a Sofi Loan, 401k loan, Bank Loan, and Credit Card Balance Transfer

How did you add value to the deal?

Spent about $4,500 renovating the units to increase the rents roughly $150. We also cut the insurance bill in half without losing any coverage and lowered the water bill by $10 a unit installing water efficient toilets, shower heads and faucets. The local utility company actually provided and installed the faucet and shower head for free as part of an energy saving initiative.

Lessons learned? Challenges?

Be careful not to put too much leverage on a property. Also make sure you have money set aside for capital improvements. You should always create your business plan when you buy a property and know how much you will need to spend each year on cap ex.

Don't wait to get started. Surround yourself with great people, treat your investing like a business and always continue to learn. You will figure it out!